A state fund to support children injured at birth is quietly suspended

For more than a decade, a little-known New York State fund has been covering the medical costs of children who suffered neurological damage at birth due to medical malpractice.

During this time, the fund has disbursed hundreds of millions of dollars to 963 families, helping to pay for hospital stays, nursing care, speech therapy and medical equipment for home use, among other things.

But without warning, the state closed the fund earlier this month. A financial report released around the same time projected that the fund would ultimately have a deficit of at least $3.2 billion – a figure that would rise if the fund continued to accept new children.

The fund’s financial problems have been known for years. Rising enrollment and a costly change in 2017 that increased the quality of care offered by the fund were cited four years ago as reasons it would run out of money by the end of 2023.

Still, the closure of the Medical Indemnity Fund, announced on the state Department of Health’s website, surprised families, advocates and lawmakers alike.

Kenneth E. Raske, president of the Greater New York Hospital Association, said hospitals – especially those that treat poorer patients – could collapse under the astronomical cost of birth injury claims, potentially exacerbating a trend that has led to the closure of about 30 maternity wards in New York since 2008.

Mr Raske said his team was taken completely by surprise by the suspension and the casual manner in which it was communicated.

“To me it was basically like saying, ‘Oh, by the way, the bridge is broken,'” he said.

The state Department of Health has assured children currently enrolled in the fund that their coverage will remain uninterrupted. On Friday, state budget officials announced short-term relief: $58 million in state funds will ensure enrollment continues through March 2025.

While state budget director Blake G. Washington acknowledged that the state’s approach to closing the fund had caused concern among affected families, he promised that they would be compensated.

Still, Washington could not guarantee the fund’s long-term viability, pointing out that the $3.2 billion deficit was only a best-case scenario and that liabilities could potentially exceed $5 billion.

“I think there probably needs to be a broader discussion – not now, but in the long term – about how the fund is supported and what the expectations are,” he said. “But that’s a problem for another day.”

For some families, it was not so easy to suppress the uncertainty.

The mother of a 5-year-old Westchester County boy always knew he had endured a difficult birth. But it took years — and diagnoses including epilepsy, cerebral palsy, learning delays and apraxia — for her to realize the consequences of the birth accident that deprived his brain of oxygen. In 2021, his family filed a lawsuit against the hospital where he was born and agreed to a settlement earlier this month.

But the day after their meeting with the judge, their lawyer delivered the bad news: Since the fund was no longer accepting new applications, the family’s settlement had been rejected.

The mother, who asked to remain anonymous due to the uncertainty surrounding the settlement, said the news was devastating. “This is a really big problem for children, excuse my language, but they have already been screwed by the system,” she said, using a swear word.

The Medical Indemnity Fund was established in 2011 by Governor Andrew M. Cuomo to reduce health care costs and provide stability to families of children with neurological damage.

These types of injuries, which often occur when a baby’s brain is deprived of oxygen during labor, are rare. But their profound impact on a child’s life, future income and ability to live independently made them spectacularly expensive for hospitals – expenses that the administration said drove up costs for all patients.

Under Cuomo’s agreement, families would still be required to pursue malpractice claims in court, but instead of requiring hospitals to pay the entire judgment or settlement, the state would cover the cost of all future medical treatment.

In return, New York committed to requiring hospitals to implement new safety measures, such as more staff and more training, to reduce the number of birth injuries.

But in the years that followed, New York’s birth injury rate exceeded expectations. While actuaries in 2011 predicted that about one in 10,000 children would qualify for benefits from the fund due to a brain or spinal cord injury, by 2014 they were predicting nearly three times that number – thanks in part to New York’s broad definition of birth injury.

The increase in enrollment put pressure on the fund, which already faced a half-billion-dollar spending gap in 2017. That pressure was exacerbated by a change lawmakers pushed through later that year that increased reimbursement rates from caps previously imposed by Medicaid.

The change resulted in much better care for children participating in the program, but dramatically increased the fund’s liabilities. In 2018, there was only one child who received more than $1 million in benefits from the fund. In 2022, there were 14.

This change was crucial, says Cameron Brown, whose daughter suffers from quadriplegia and cerebral palsy as a result of a birth injury.

She is doing well, Brown said, and that is largely thanks to the care she has received through the fund. But that, too, presents a long-term funding challenge.

“My daughter was supposed to live to 19 – she’s 14,” he said. “But she’s doing really, really well. She’s getting a lot of treatment. Could she live to 40 or 50? That’s quite possible.”

Julie Smith’s son, now 16, has been part of the fund since its inception. It hasn’t always been easy, she says, recalling countless hours spent studying paperwork, negotiating with case managers and pushing for reimbursements.

Still, she believes the fund offers more stability than other options. “If you need extensive medical care, the money isn’t enough,” she says, citing the costs of nursing care, hospital stays and medical equipment.

“It’s not sustainable,” she said. “Just like the fund is not sustainable.”

It is unclear how long the government will be able to raise the money needed to meet its obligations, which are expected to only increase in the coming years.

State Senator Liz Krueger, chair of the Finance Committee, has introduced a proposal to extend the fund’s enrollment period by two years and provide more permanent protections for children currently enrolled. A plan proposed in the State Assembly would keep the fund open for another year.

Ms. Krueger acknowledged that the fund is imperfect in many ways, primarily because it has failed to significantly reduce the number of birth injuries, but she believes the state has a moral obligation to the children who benefit from the program it establishes.

“Maybe it wasn’t a good program, maybe we shouldn’t have done it,” said Ms. Krueger. “But we did it.”